SM Entertainment CFO explains leadership’s opposition to HYBE’s “hostile takeover” of the K-pop agency

SM Entertainment CFO Jang Cheol-hyuk also claims that SM and its artists will be “deprioritised” under HYBE’s management, among other allegations, in a new video statement

SM Entertainment has released a video of its CFO Jang Cheol-hyuk explaining company leadership’s opposition to HYBE’s recent acquisition of a controlling stake in the K-pop agency.

On February 20, a video titled “The reason why SM is against HYBE’s hostile takeover” was published on the agency’s official SMTOWN YouTube account, which usually only releases content for its artists. In the clip, Jang directly addressed fans of SM’s artists and its shareholders, outlining the agency’s view on HYBE’s recent acquisition and what it sees as potential consequences of the merger.

In the video, Jang claimed that HYBE did not request due diligence material from SM Entertainment during the merger and acquisition disclosure process despite the large scale of the deal – a 1trillion won investment on HYBE’s part, which would require the agency to take a short-term loan in order to finance it, according to HYBE’s regulatory filing on February 10.


Jang then raised this as an indication that HYBE’s corporate governance is “far from sound or rational”, claiming that SM Entertainment would “inevitably” be subject to this “weak governance” should HYBE take over the company, to the detriment of SM’s shareholders and artists.

Jang also claimed that the values and interests of SM’s shareholders would likely not be prioritised in the event that HYBE successfully dominates its board of directors, and alleged that a takeover by HYBE would lead to the de-prioritisation of SM artists and their music releases due to HYBE’s roster already being “saturated” with artists from its existing subsidiaries. Jang also claimed that HYBE’s takeover of SM would accelerate the increase of concert ticket prices.

Jang later claimed that HYBE’s takeover of SM would create a monopoly that would ultimately be detrimental to the K-pop industry as a whole, citing figures that put the combined market share of the two agencies based on revenue at 66 per cent of the entertainment industry. “K-pop would lose opportunities for a greater advancement forward,” claimed Jang. “Ultimately, K-pop fans will be the ones that will be most affected by the monopoly.”

Additionally, Jang alleged that HYBE “intentionally evaded” scrutiny by Korea’s antitrust authority, the Fair Trade Commission, in its acquisition of SM. According to the CFO, HYBE’s purchase of SM founder Lee Soo-man’s 14.8 per cent of SM shares and its tender offer to purchase up to 25 per cent more shares from minority shareholders was “planned simultaneously” since they were announced on the same day, and should therefore be considered a single event subject to review by the Fair Trade Commission.

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Lee Soo-man. Credit: Rich Polk/Getty Images


Jang reiterated SM Entertainment leadership’s opposition to HYBE acquisition and cited an anonymous workplace survey conducted via the app Blind which said that 85 per cent of SM Entertainment’s employees oppose the takeover. The video concludes by sharing the statement released by a collective of 208 SM employees last week in which they announced their intention to resist a takeover by HYBE.

Approached for comment by NME, HYBE said in an email: “We have seen the video SM Entertainment uploaded today and it does not seem different from what they have announced and claimed so far. HYBE will be focusing on improving SM Entertainment’s corporate governance to revise the company’s internal management structure, as well as continuing to maximize shareholder value.”

The video by Jang follows the release of a video by SM CEO Chris Lee (also known as Lee Sung-soo) on Friday, in which the CEO accused HYBE of carrying out a “hostile” takeover of SM Entertainment and questioned the process of the acquisition. He also announced his intentions to resign as a CEO and director of SM following the conclusion of the agency’s shareholder meeting in March. If all the board members allow me, I will go back to my main job in the music department, and work hard for SM once again,” he said.

SM’s statement of its 2022 earnings would be revealed later today, Jang said in the video, and that its “SM 3.0” business, global and investment strategies would also be shared at a later date before the deadline of HYBE’s ongoing tender offer to minority shareholders.

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